The BSE Sensex surged by 673 points and the Nifty breached the 17,800-level on Tuesday on account of hectic buying across sectors.
Continuing its winning momentum for the third straight session, the 30-share BSE benchmark opened with significant gains and saw further consolidation as the trade progressed.
It finally closed at 59,855.93, clocking a gain of 672.71 points or 1.14 per cent. Likewise, the NSE Nifty rose 179.55 points or 1.02 per cent to end at 17,805.25.
On the Sensex chart, major gainers were NTPC, PowerGrid, SBI, Titan, Reliance, Bajaj Finance and Axis Bank, rising as much as 5.
48 per cent.
On the other hand, Sun Pharma, Ultratech Cement, IndusInd Bank and Dr Reddy's closed in the red.
"US markets setting record highs on the first trading day of 2022 is auspicious for global stock markets," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
If the FIIs' buying of Monday is an indication of their renewed interest in India, financials particularly the leading banks, are likely to continue the momentum witnessed in the previous session, he added.
However, the third wave of the pandemic is an area of concern even though the market's view is that it is unlikely to impact economic activity, Vijayakumar opined.
Elsewhere in Asia on Tuesday, bourses closed mixed as concerns over the Omicron variant tempered optimism set off by a rally on Wall Street.
Meanwhile, international oil benchmark Brent crude rose 0.27 per cent to USD 79.19 per barrel.
Foreign institutional investors (FIIs) were net buyers in the capital market on Monday, purchasing shares worth Rs 575.39 crore, exchange data showed.